Insights

It’s The Market, Stupid

by | Apr 7, 2014

Key Insight

If the market wants broader compliance with certifications, more traceability, higher quality, conservation of genetic diversity, decent working conditions or other things from origins, it needs to create the appropriate incentives for them.

Coffee may have something to learn from the mantra of the generals who ran the War Room during Bill Clinton’s 1994 campaign for president: it’s the economy market, stupid.

Thanks to my own recent experiences in the field and some provocative articles in The Producer Issue of the SCAA Chronicle, I am seeing with unusual clarity these days that perhaps nothing explains the way farmers behave at source as well as the signals they get from the marketplace.

Virtually all of the issues I have written about on this blog are influenced, in whole or in part, by the incentives the market creates, or doesn’t.

 

  • Farmer organization
    When I started traveling to Nariño over three years ago for our Borderlands Coffee Project, my suggestion that we would work to organize smallholder farmers and create farmer-managed washing stations was met by the coffee establishment with skepticism and well-intentioned admonitions.  I was told that Nariño’s unique “culture” was not conducive to farmer organization, and that collective enterprises like washing stations were doomed to failure.  Certainly the track record is less-than-encouraging.  Only 2 percent of the growers who responded to our baseline survey reported selling coffee collectively, and fewer than 300 of the 38,000 coffee-growing families in Nariño are organized in the region’s only Fair Trade Certified cooperative.  But the early successes of our efforts to help growers organize for the marketplace as part of a Fair Trade USA pilot for certification of independent smalholders suggest that farmers will organize when the market creates sufficient incentives for them to do so.  Is the lack of farmer organization in Nariño primarily the result of its “culture,” something as unique to its Andean highland communities as the terroir of its coffees?  Or is it a question of incentives?  A reflection of the fact that prices are already high in Nariño?  That the two brands that dominate the local market deliver significant financial and non-financial value to growers without requiring them to organize?  That social organization may have significant opportunity cost without generating enough added value to make it worth farmers’ while?